Gold miners extended their August rally Thursday even as long-term US Treasury yields rebounded and bullion edged lower, highlighting investors’ appetite for precious-metals equities amid mounting fiscal concerns.
The VanEck Gold Miners ETF (NYSE Arca: GDX) gained 2.3% by 12:40 p.m. ET, while Agnico Eagle Mines (TSX, NYSE: AEM) rose 2%, Newmont (NYSE: NEM; TSX: NGT) advanced 2.2% and Barrick Mining (NYSE: B)(TSX: ABX) added 2.1%. Spot gold traded near $4,509, down marginally.
The gains came as the 30-year Treasury yield climbed as high as 5.27% before easing to about 5.25%, erasing much of the decline that followed the Treasury’s decision Wednesday to at least double buybacks of longer-dated bonds.
The moves suggest investors remain unconvinced that the Treasury’s latest intervention can contain long-term borrowing costs as US public debt surpasses $40 trillion. Persistent fiscal pressure and elevated yields strengthen gold’s appeal as a hedge, while miners offer leveraged exposure to high bullion prices.
Treasury toolkit
Treasury Secretary Scott Bessent moved quickly to address the bond market’s reaction, telling CNBC Thursday that buybacks “could be more than the $4 billion” planned for next month and that the administration would unveil a fiscal consolidation plan by the end of this week or early next week.
Bessent pointed to potential savings from a fraud task force and suggested programs “frittered away” at the state level could face cuts. He dismissed the latest 24-hour moves in yields as “noise,” said the Treasury has “a big toolkit” and argued there is a “very good chance” the fiscal deficit has peaked.
Bond strategists remained skeptical that larger buybacks would alter the underlying trajectory.
George Catrambone, head of fixed income at DWS Americas, called the intervention “the equivalent of tossing paper towel into a tsunami.”
Molly Brooks, US rates strategist at TD Securities, said the yield increase “is actually driven by oil” and described the buyback shift as “more of a Band-Aid for Treasury’s long-end.”
George Goncalves at MUFG characterized the move as “incremental and tactical,” aimed at buying time, while Andrew Canobi at Franklin Templeton pointed to “a synchronicity of forces arguing for higher yields” across developed markets as fiscal pressures and stubborn inflation weigh on demand for long-term government debt.
The skepticism underscores the challenge facing the Treasury. Buybacks can support liquidity and demand at the long end, but they do not by themselves resolve the fiscal pressures pushing investors to demand higher yields.
Gold leverage
For gold miners, that uncertainty may be precisely the attraction.
The US government is buying back long-dated bonds as it confronts a debt load above $40 trillion and a deficit approaching $2 trillion. If those measures fail to restrain longer-term yields, concerns over debt sustainability and fiscal credibility could reinforce demand for gold as a hedge.
Mining equities can magnify moves in bullion because higher gold prices can expand producers’ margins and cash flow faster than the underlying metal rises. That operating leverage helps explain why miners can advance even during sessions when bullion itself pauses or retreats.
The divergence Thursday — miners gaining while spot gold slipped and long-term yields rebounded — suggests investors are looking beyond the day-to-day moves in bullion and bonds toward the broader fiscal backdrop.
The risk is that persistently higher yields eventually strengthen competing returns available from government debt or tighten financial conditions enough to pressure gold and equities. For now, however, miners are signalling that investors remain willing to bet that Washington’s struggle with debt and borrowing costs will continue supporting the gold trade.
(With files from Bloomberg)
